When Louis Vuitton's new flagship store is unveiled in New Bond Street, London, next week, the central space in this temple to luxury will literally be dominated by a load of old rubbish. While Vuitton might prefer me to say that the 16ft kinetic sculpture it has commissioned from Michael Landy is made out of antiques and collectables, the artist himself cheerfully refers to the component parts as junk.

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We meet at Landy's studio on bustling Vyner Street, a hub for artists and small galleries in the middle of the East End, and I like him immediately. He is very warm and charming, and quick to laugh - especially at himself. 'I have to apologise for the mess,' he says, taking me into the austere main space of his studio, which actually turns out to be shockingly neat. Discarded children's toys, the severed head of a shop mannequin, antlers, rusting tools and large bits of industrial machinery are arranged on the floor in orderly rows, waiting to be cleaned and assembled into the sculpture. Otherwise the space is pristine and virtually empty, apart from a table and chairs and May, the friendly young Stafford­shire bull terrier he shares with his partner, the artist Gillian Wearing, who works in the studio above.

He shows me some drawings of what he hopes the finished piece will look like. It will move via a series of cogs and wheels, and will also incorporate an automated drawing machine that he hopes will produce abstract works that shoppers will be able to take away with them. That is if it all goes to plan, he adds, explaining that he has never done anything like this before, and though there should be time to do a trial run before the shop opens to the public, he is on a far tighter schedule than he is used to.

'I don't like that at all,' he admits. 'It makes me feel slightly unbalanced. I don't like making decisions about anything, and I like doing things in my own time.'

The whole thing is a homage to the late Swiss artist Jean Tinguely, whose work Landy first saw as an 18-year-old student at a Tate retrospective in 1982. 'It's quite anarchic. Things pogoed, or you could throw balls into a machine and they'd spew out the other end. It was the first time I ever saw anybody smiling and enjoying themselves in an art gallery.'

Tinguely's own kinetic sculptures often broke down or failed to work at all, most spectacularly with a piece called Homage to New York in 1960. Made out of junk, the 27ft sculpture was supposed to destroy itself in 27 minutes, but although it burst into flames it did not detonate fully and had to be extinguished by the fire service, with onlookers then scrambling to take away pieces as souvenirs. Landy recently tracked down some of those people and made a documentary about the piece, which showed at Tate Liverpool at the end of last year as part of Joyous Machines, an exhibition that combined Tinguely's sculptures with more than 150 of Landy's intricate drawings.

Landy hoped to recreate the self-destructing sculpture, but Tinguely died in 1991 and Landy has been unable to obtain copyright clearance from his estate. 'I cried,' he says endearingly, adding that he intends to keep trying. 'It's a complicated family situation. I guess they think I'm taking away, whereas I think I'm adding to his legacy.'

You can perhaps understand their reluctance. Landy is best known for a spectacular 2001 piece called Break Down, in which he meticulously catalogued everything he owned, from cotton buds and useless bits of plastic to his car and his art collection. He then installed a conveyor belt and grinding and shredding machines in an empty shop in Oxford Street and proceeded systematically to destroy it all. Over two weeks, 7,227 separate objects were reduced to dust or granules, and nothing was spared: his car; clothes; old love letters; family photos; artworks given to him by friends such as Gary Hume, Damien Hirst and Abigail Lane; his credit cards; and his own artist's archive. It all went into the machines. At the end of it, all

he was left with was his cat, the boiler suit he had worn while working - and a mountain of debt.

He had planned to sell some of the granulated possessions so that he could pay back people who had helped fund the event, but eventually decided that destroying all your belongings in order to create new belongings for other people was not the point, and that the piece would not have the same power if he were seen to profit from it. Eventually he published a full inventory of what was destroyed, but that was all.

'One gallery said years ago that it couldn't make any financial sense out of me,' he says. 'That's always the problem, really. I haven't got any product. I don't have things to sell. And it's hard to sustain that.'

It was a powerful piece, and even thinking about it, nine years on, leads you to start making your own mental inventory and wonder how on earth you came to surround yourself with so much stuff.Landy stresses that he is not necessarily against people having nice things. 'My mum and dad spent all their lives working hard to acquire things. They left Ireland and came over here to work, and this is their home now. They love this country. So it wasn't about denouncing that. But at the same time it's a luxury that I ended up with 7,227 things, one you can only ever have in the West.'

Michael Landy was born in Hackney, east London, in 1964, although his parents later moved to Essex with him and his two sisters. His mother is a retired nurse, his father was a labourer, digging out tunnels, until a horrific accident in 1977 when a tunnel collapsed on him, breaking his back and leaving him unable to work and, as the years have passed, increasingly unable to do very much at all.

Landy says he was a very shy child. 'It was almost as if I didn't exist at school. I liked to dis­appear as much as possible. I didn't want to draw attention to myself.' Early on, someone told him he was good at drawing, so that is what he did,

for hours on end. 'I didn't really go out. I was a mummy's boy, I guess. When I left home I couldn't phone for the first four weeks because if I spoke to my mum, I'd be on the next train home.'

He chose to go to Loughborough to study textiles because it seemed a way to use his art skills to earn a living, but it did not work out. He left after the second year and applied instead to Goldsmiths in London, which turned him down twice before finally giving him a place. 'Lots of times in my so-called career I've had knockbacks, for one reason or another,' he says when I admire this determination. 'But this is the only thing I want to do, so if I'm not going to do this, I'm not going to do anything.'

In 1988 he took part in the now-famous Freeze exhibition that launched the careers of the generation that became known as the YBAs. But while many of his peers, including Damien Hirst and Gary Hume, found success quickly, Landy spent the first half of the 1990s working alone on big, labour-intensive projects while dodging various attempts by the Government to retrain him. 'How did it make me feel? Pretty rubbish about myself,' he says. 'But it's what I chose to do. I'd work on one particular project, and it might take two or three years. That was partly for financial reasons, because I didn't have the money to fabricate the work.'

The anger came out in Scrapheap Services, a large-scale installation that imagined a cleaning company sweeping up the unwanted people discarded from a workforce. When this piece was acquired for the Tate collection in 1996, Landy was able to buy some of the trappings of success: a car, a suit. 'Suddenly I thought, "What does this all mean? Is this what it's all been about?" And it just popped into my head that I would destroy all my worldly belongings.'

It took a while to work out exactly how he would do it, but says the two weeks he spent systematically destroying everything he owned were exhilarating and liberating. Afterwards he inevitably had to start acquiring stuff again: a new birth certificate, a passport. The Inland Revenue investigated him for destroying all his tax records. 'They looked me up and realised that I wasn't just trying to evade paying my income tax. They could have fined me for every year, but they let me off.'

What was hardest, though, was getting back to work again. 'It was such a full stop. You start thinking, "How am I ever going to top that?" And then, "What the hell do I do?" Because it was such an end point.'

Eventually he found a new focus. 'I started looking at weeds, little spindly things that grow in cracks in the street, and I began to make very delicate etchings of things. And I was able to spend a lot of time by myself. It's just you and a plant and an etching tool.'

He likes being alone, and says he has never had an assistant because he would worry about what to do with them. 'If I don't know what I'm doing, then the assistant doesn't know what they're doing, and it all becomes a bit pointless. And I've spent years not knowing what I'm doing.'

In 2004 he made another powerful work, about his father's devastating accident, spending long stretches of time back home, filming his dad and then, when that felt too intrusive, simply drawing him. 'He didn't always want to be part of it - he would tell me to sod off, or act indifferent. But if you just sit long enough, something will eventually happen. It wasn't a bag of laughs. I felt that whatever I did, it wasn't ever going to be good enough.'

He began looking at the house he grew up in, and how it was slowly falling apart as his father was no longer able to do the DIY he had always loved. 'The house became his body, in a sense. Because as he was slowly starting to crumble, the house was starting to decay as well.'

Landy ended up building a full-size recreation of the house's exterior inside Tate Britain, with all its blotches and botched work, and showing it with film of his father's dusty DIY shelf and a soundtrack of his mournful whistling.

'It was always about not being able to articulate what had happened to Dad, really. Every time I went to visit Mum and Dad, I left feeling, "I'm an artist, why can't I do something with this?" And I ended up doing it, but it didn't change his life. It didn't make him walk any better. So it was probably more about me than anything else. Although I tried for it not to be.'

I wonder what they made of it, his parents, seeing an exact copy of their Essex semi squeezed into a London gallery. 'They never really said,' he says. 'But then they never said anything when I shredded my worldly belongings either.'

They have since moved, to a bungalow on the Essex coast, and look after the dog when Landy and Wearing are away. 'It's nice to go down there and see them. They're happy. The house was too big for them, and now Mum has got it all exactly how she wants it.'

While he was working on Semi Detached, Landy became aware of a strange throbbing sensation in one of his testicles. 'I didn't do anything about it for ages, because it's a pain, going to the doctors about something like that. But it persisted so eventually I went, and they said it was cancer. I started thinking, "I wish I'd made more work! I'm going to die, and I haven't made enough work." But it was very slow growing, so they just chopped out my testicle, and I didn't have to have any radiotherapy or chemotherapy. I was lucky.' Last Octo­ber he passed the five-year mark, with no sign of the illness recurring. 'At the beginning, there's a game it plays with you: every little pain feels like the cancer coming back again. But over time you go to hospital less and less, and you start to forget about it. Now I've been signed off. So I've as much chance as anybody else of my age of getting it.'

He has made some drawings showing his scar, but the most lasting effect was that he stopped smoking 40 cigarettes a day. 'I used to really enjoy it,' he says wistfully. 'Smoking, looking at art and making art was a real pleasure. So with that and the cancer I went a bit mad for a while, loads of energy and lots of temper tantrums.'

Michael Landy's work has often been a critique of a society that treats people as expendable while producing more commodities than any of us really need, which does not seem to sit comfortably with a luxury goods brand, and he was surprised, but also intrigued, when Vuitton approached him.

But the company has a long-standing commitment to supporting the visual arts in London. As well as Landy's sculpture, the shop will feature works by British artists such as Gilbert & George, Anish Kapoor and Damien Hirst, and as part of the opening celebrations there will be a poetry slam hosted by Chris Ofili and featuring young urban poets who have grown from workshops run by his friend and collaborator Charlie Dark.

It is all part of Vuitton's mission to give something back to London, and ties in with its three-year commitment to fund youth education projects that will bring together five major London galleries: the Hayward, Royal Academy, Whitechapel, Tate and South London Gallery. Landy is part of the working committee steering this, and Vuitton also supported his recent show, Art Bin, in which artists were invited to dump failed pieces into a transparent skip.

Still, it was not an obvious fit. One of his first ideas was to install a machine in the window and let people bring in their counterfeit Vuitton bags to be shredded in it. When the company settled on the sculpture instead, one of the first things he had to do, ironically, was go shopping. The large bits of industrial machinery sourced for the sculpture come, he points out, 'from manufacturing industry that no longer exists'. For the rest, he has combed boot sales in Essex and eBay. 'I'm not the world's best shopper, as you can imagine.

I pretend that I can barter now. Ten years ago I probably wouldn't have been able to do even that. I'd pay whatever was asked just so I wouldn't have to go through the whole embarrassment. And I've also worked out that it's a lot easier to find stuff on eBay.'

Landy has just started a two-year stint as artist in residence at the National Gallery. Again, he was surprised to be asked - 'I had to go in there to make sure they weren't pulling my leg.' He has only just moved into his studio there, and is starting to look at the space, the people, and at paintings he has not considered since doing his art O-level. 'It's interesting. I've never made a painting in my whole life. At the end of it you get an exhibition, and you are compared with the great and the good. You're on a hiding to nothing, in a sense, but that's what makes it intriguing.'

Landy is 46 now, and is starting to think more about his legacy as an artist. He has also begun to collect some serious status symbols. 'I've got a Lexus,' he says when I ask if he ever bought another car. 'It's got a power door. It opens automatically. Everyone should have a power door!'

Still, he has not gathered anywhere near 7,227 things around him again, and he says the home in Spitalfields he shares with Wearing is fairly clutter-free. 'I throw away stuff all the time. Sometimes I throw away Gillian's stuff as well. I'm very ordered, actually. I have hardly anything in my cupboards.

I get rid of things the whole time. I don't like clothes with rips or holes, and I always throw away stuff after I've done a project.'

A lot of his work has ended up in landfill, he points out. With Break Down that was his choice, but sadly Semi Detached ended up there too. 'It would have been too expensive to store. That wasn't my decision. But then I like Jean Tinguely's piece because that ended up in a dump in New Jersey. There is something about that, about me not wanting to make things that are materially tangible. So making this Louis Vuitton piece is interesting for me - putting things together is not what I normally do.'